The post Layer 2s Thrive While ETH Struggles to Keep Pace appeared on BitcoinEthereumNews.com.

Ethereum continues to lead in terms of stablecoins and tokenization, with its stablecoin supply reaching a whopping $130 billion and tokenized treasuries such as BUIDL surpassing $1.8 billion in assets. However, despite this liquidity surge, activity on Ethereum has declined compared to previous years. In fact, ether’s performance weakened further in Q1, as the ETH/BTC ratio sank to a five-year low. According to Coin Metrics’ latest report, this disconnect between Ethereum’s network, its Layer 2 expansion, and ETH’s market value appears to be influenced by multiple factors, particularly its approach to scaling via Layer 2 solutions and the current absence of significant value accrual to ETH through network fees. Ethereum Faces Value Leakage The introduction of blobspace with EIP-4844 in the Dencun upgrade significantly altered Ethereum’s network economics. In March 2024, the blockchain generated nearly $30 million in fees, but one year later, that figure plummeted to around $500,000. Coin Metrics stated that this sharp decline stems from execution shifting to Layer 2s, with minimal value returning to the main chain. Base, Arbitrum, and Optimism have collectively paid just $13 million in blob fees while enjoying over 90% profit margins from sequencer revenue. This, in turn, has sparked concerns about value leakage, as Ethereum shoulders security costs while Layer 2s capture most of the economic benefit. Additionally, blob fees make up just 0.07% of total fees, which has led to lower ETH burn. Over the past week, Ethereum has burned roughly 70 ETH per day. This has caused net issuance to rise, thereby pushing the annual inflation rate up to 0.79%. While this is currently putting downward pressure on ETH’s price, the network’s longer-term scaling efforts through Layer 2s may require more time to yield significant results. What’s Next for Ethereum? As blobspace becomes more commoditized and Layer 2 business…

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Filed under: News - @ April 2, 2025 11:26 am